Sunday, September 25, 2005

Insurance Not Needed?

Ben Franklin started it all! Prior to his innovations of fire departments and fire insurance, calamitous fires were common in U. S. cities. Many burned to the ground. But when people started to protect themselves with Franklin’s two innovations, they began demanding better fire departments so that their insurance premiums weren’t so onerous. Building codes were strengthened to prevent fires and make them easier to fight.

But as we’ve seen in the last month in New Orleans, few people are as passionate about levees or protecting themselves from a flood that is sure to come. Why is that?

They have no vested interest in protecting their property because they know that the federal government will bail them out if something catastrophic happens. Only 40% of the homes in New Orleans had any type of flood insurance, even though the city was ten feet below sea level!

In the 1960’s the U. S. government took over the business of insuring against floods. As a result people built seaside homes and condos in areas that would never have been developed, knowing that if a hurricane hit they would get bailed out.

No one is taking responsibility, either personally or city-wide. The federal government should still help coordinate disaster relief but every town should take responsibility for fighting floods just like they do in fighting fires. Individuals should buy flood insurance or suffer the consequences when their homes are destroyed. We should get back to a fire insurance model for floods and hurricanes.